Trade war means U.S. dairy is missing out on China's demand boom

Dairy consumption on the rise in China, but U.S. losing out to rival suppliers because of trade dispute

Exports of U.S. dairy to China dropped 54 percent in 2019's first half

Michigan industry hit, and farmers looking to get creative

Lon Hordwedel for Crain's Detroit Business

Pregnant dairy cows peer out of their barn at Horning Farms in Manchester, which houses more than 400 dairy cows.

America's dairy farmers, already struggling with falling milk consumption and low prices, are missing out on a rare demand boom thanks to President Donald Trump's trade war with China.

Dairy consumption is on the rise in China, where consumers are eating more pizza, having more wine and cheese nights and drinking more milk. While the outlook for demand in the country is "really bullish," the U.S. is losing out to rival suppliers because of the trade dispute, said John Wilson, chief fluid marketing officer officer at Dairy Farmers of America.

U.S. dairy exports to China dropped 54 percent in the first half of 2019 due to tariff retaliations, according to Alan Levitt, vice president at the U.S. Dairy Export Council. Relations need to be normalized so that the U.S. can be competitive again with New Zealand and the E.U., Wilson said.

Photo

Falling exports to China are the latest blow to the American dairy industry, which has been in free fall over the last several years. Americans are drinking 40 percent less milk than in 1975, and prices have suffered a rout. The downturn has been a near-deadly blow to stalwarts like Dean Foods Co., the top U.S. dairy company that has seen its shares plunge more than 70 percent this year.

Michigan ranked fifth in milk production in the U.S. in 2017, according to the United Dairy Industry of Michigan. But it is among states whose large dairy industry has been hit by overproduction and declining exports.

But last year alone, 154 Michigan dairy farms shuttered, nearly three every week, according to data from the Michigan Department of Agriculture and Rural Development. Another 41 dissolved between December 2018 and January this year.

Many of the farms that remain have burned through their farm equity and credit to remain in business. Often at least one member of the family works an off-farm job to pay bills or buy groceries to effectively preserve the way of life.

But now some dairy farmers are looking beyond the age-old farming model to new niche areas to thwart insolvency. Jeff Horning of Horning Farms in Manchester, for example, told Crain's he is looking at appealing to suburban families with agritourism, potentially capitalizing on the farm-to-table movement with a bed and breakfast, or farm-branded cheese.